What are the big issues that have impacted retailers over the past year? Inside Retail recently published its annual industry survey, Australian Retail Outlook, powered by KPMG, which asks this question of business leaders.

7-Eleven CEO Angus McKay says “Keeping costs down and offering great value for money should be the priority. Retailers should prioritise investments that drive value and differentiate themselves to the customer.”

Here are five challenges in retail, likely to continue well into 2023 and beyond.

Staffing issues

The lack of international students and backpackers really hit the sector. Covid-induced sick and carer leave added to the staff shortages.

Australian Retail Outlook found 44 per cent of retailers expect staffing to be a major challenge this year.

For 39 per cent of those surveyed, one of the key concerns will be retaining existing staff.

Supply chains

In 2022 many retailers’ finely-tuned supply chains were severely disrupted.

According to Jana Bowden, professor of marketing at Macquarie Business School, the cost of shipping goods to Australia rose by up to 700 per cent. Ordering times significantly increased while the time retailers had to pay for their orders decreased.

Almost a quarter (24 per cent) of survey respondents cited supply chain concerns as an ongoing priority.

While KPMG expects the impact on supply chains to lessen this year, for 20 per cent of respondents, shipping and delivery is expected to test their mettle in 2023.

E-commerce

There was a definite return to physical stores with almost three in four shoppers opting to purchase goods in-store.

Thirty nine per cent of retailers with bricks-and-mortar shops plan to increase their store numbers in 2023.

In contrast, fewer retailers (30 per cent) cite online expansion as a major focus for 2023.

So while online retailing remains significant to the consumer market in the short-to-medium-term, it remains less important than physical stores.

According to Inside Retail, 49 per cent of retailers saw an increase in online sales, however just 12 per cent achieved a significant rise in their e-commerce revenue in 2022.

KPMG says predictive analytics and improved ecommerce technology will increasingly drive traffic, encourage purchases and emulate instore interactions in the online customer journey.

The firm suggests retailers can find success in ecommerce and data measurement by collecting and aggregating detailed retail consumer data; identifying and understanding behaviour in real time; and delivering a pertinent, personalised message to the consumer.

Taking a stand

Australian Retail Outlook author Mark Fletcher, suggests 2022 highlighted the impact of environmental, social and governance (ESG) behaviour. 

The Russian invasion of Ukraine put global brands in the spotlight with many retailers closing their stores in Russia. Uniqlo’s counter move to stay open to allow Russians the “basic human need” of buying clothing, lasted less than a week.

Fletcher says most retailers appear comfortable with their ESG strategy. Just 15 per cent believe it to be a top priority for 2023.

Buy now, pay later

The ‘Buy now, pay later’ (BNPL) model has become widely popular in retail. However consumer groups have been critical and BNPL has faced intense scrutiny – expect to see some regulatory reform, says Fletcher.

The Australian Competition and Consumer Commission’s Digital Platform Services Inquiry looked at online marketplaces. It concluded these businesses use algorithms to operate a “high level of control and involvement” that influences consumers’ purchasing behaviour.

Key concerns are the use of consumer data, lack of dispute resolution mechanisms and some websites’ preferential product ranking.